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Side Hustling Your Way to Zero Debt with Eric Rosenberg from Personal Profitability

When people think about achieving their financial goals—maybe it’s paying down debt or saving for an emergency fund—they usually think about cutting back on their spending. And don’t get us wrong: cutting back your spending is important. By setting a budget and sticking to it, you can free up additional funds and set yourself up for true financial success. But there’s also a flipside to debt repayment that doesn’t get talked about as often. While decreasing your spending is important, so is increasing your income.

The more money you’re making; the more money you can be putting towards your debt. (This is assuming that you have already set a budget, of course. Paying down your debt without a budget is … not something we recommend. Like at all.) One great way to increase your income is by getting yourself a nice little side hustle. We talked to Eric Rosenberg from Personal Profitability about some of the ins and outs of using a side hustle (extra income you make outside of your day job) to pay down your debt.

Choosing a Side Hustle

Once you’ve decided to earn some extra cash through a side hustle, the next step is choosing which side hustle to pick up. And you’ll have a lot to choose from. When it comes to side hustles, the possibilities really are endless.

“Anywhere you can make money is a good side hustle,” says Eric. “Look at your skills and hobbies first and try to leverage those to earn income on the side.”

So if you’re the crafty or artistic kind, maybe that means starting your own Etsy store to sell handmade jewelry. If you have a large collection of comic books from your childhood, there’s a good chance that at least some of them will fetch a pretty penny on eBay. And if you like scouring local flea markets for great finds, that’s a hobby that could easily be used to make a buck on Craigslist.

If selling items isn’t your jam, how about selling services? Eric has some other suggestions:

“Online freelance services are an easy and safe way to get started from the comfort of your own home. Lawn care or snow removal are also widely needed year round in your neighborhood. You can also quickly become an Uber or Lyft driver (or Postmates if they operate in your city) if you own a car.”

Keeping That Extra Income

Once that extra income starts rolling in, it can be extremely tempting to use it as extra spending money. And if you’re already living on a tight budget, you may feel like you’ve earned the right to treat yourself. While the occasional treat might not break the bank, using your side income for splurging can easily get out of hand, leaving you back at square one.

Eric agrees that “lifestyle inflation is a tough thing to avoid when earning more,” But don’t worry. Eric has some good advice for how to keep yourself from splurging away all your side hustle money.

“The best way to ensure your side hustle income goes to your debt payoff is to track your business income separately from your personal income. In fact, you should always keep business income and expenses separate for tax and legal reasons. Each time your business has enough cash in the bank to pay you, save 25% for taxes and put the rest right into a debt payment.”

To that we’ll add one more thought: If you do want to splurge every now and again, just add that line right into your budget. Set aside $50 a month for a nice date night at the movies or a mani-pedi. By budgeting for that extra treat, you’ll be able to reward yourself every once in a while and still stay on top of your finances.

Strategize Your Debt Repayment

Paying off your debt isn’t simply a matter of freeing up cash. If you don’t go into it with a solid plan, you’re all the more likely to fail. There are two popular debt repayment strategies: The Debt Snowball and The Debt Avalanche.

With The Debt Snowball method, you’ll put all your extra money towards paying off your smallest balance first. Every time you pay a debt off, you add its minimum payment amount towards paying off your remaining balances. This way, the amount your paying towards each subsequent balance grows larger, like the proverbial snowball rolling down a hill. This strategy gives you some early victories that can encourage you to keep going.

With The Debt Avalanche, you line up your debts in the reverse order: from largest to smallest. And this time you’re not ordering them according to their balances; you’re ordering them according to their interest rates. You pay off the debt with the largest interest rate first and work your way down, paying off the debt with the smallest interest rate last.

Mathematically, the The Debt Avalanche method is the absolute winner,” says Eric. “That is what I used to pay off my $40,000 in student loans in two years and six days after graduation. Always focus on paying off high interest debt first and then cascade down into the lower interest rates. While it doesn’t offer the same psychological quick win as the debt snowball, you can’t argue with math!”

Plan for the Future

Once you’ve paid down your debt, does that mean you should just close your side hustle down? For some people out there, that might be the right call. But for others, especially for people who’ve found a side hustle that’s both profitable and enjoyable, that extra money can still be put to sound use.

“If you don’t have one already, start saving for an emergency fund,” says Eric. “You never know when a car may break down or your furnace or hot water heater will go bad. It would be a shame to go back into debt after paying things off because you don’t have savings.”

Further Reading

And if you want to learn more about how to maximize your earnings, check out Eric’s book, The Personal Profitability Playbook, which you can get for free on the Personal Profitability website.

Eric says, “I built Personal Profitability on four core principles: Earn more, spend thoughtfully, grow your wealth, and live a better life through mindful personal finance. If you treat yourself like a business, you’ll be on set to reach your maximum personal profits!”

About the Contributor: Eric Rosenberg

Eric Rosenberg is a finance, travel, and technology writer currently living in Ventura, California. When away from the keyboard, Eric enjoys exploring the world, flying small airplanes, discovering new craft beers, and spending time with his wife and daughter. You can connect with him at his finance blog Personal Profitability.

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